Monthly Archives: March 2014

EURCHF FX – Price Level vs Volume Level – Heat Map Chart


Think this chart is great. It was presented by Dewet Moser, Alternate Member of the Governing Board of the SNB today at the SNB Apéro 2014. I swapped the captions from German to English.

Very interesting to see how the heat map has turned cold with just short bursts of volume and price action two times in last 18 months.

Such heat maps are useful in gaging investor psychology and key technical levels, which I understand to be levels at which lots of volume or high volatility occured, floors or tops were set.

I disagree that these levels marked in dark red aren’t relevant, as the efficient market gang often invokes.


Thurgauer Kantonalbank IPO 2014

Please note this is a post in relation to my current studies to become a CIIA (Certified International Investment Analyst).

According to my information (based on the press release) the Thurgauer Kantonalbank (TKB hereafter, Ticker: TKBP) is placing up to 2.5m PS (Partizipationsscheine = participation certificates) from today till April 4th. Share trading is expected to commence April 7th. Book building range: CHF 64 – 74.

According to my calculations buyers of these PS will be entitled to receive 12,5% of the TKB’s earnings (Jahresgewinn), which was CHF 99.8m 2013 and CHF 87.9m 2012 according to the TKB annual report 2013 (page 82) starting next year.

That would be around CHF 12,475m earnings (CHF 4.99/PS). Assuming the shares are priced at CHF 64 that would give PE Ratio of roughly 13, assuming they’re priced at CHF 74 the PE would be 15.

Now according to NY Stern caluclations based on S&P Capital IQ, Bloomberg and the Fed the bank PE ratios are, as of January 2014, 15.24. While the trailing PE is 16.47 and the forward PE is 14.59. Looks reasonable. Then look at the expected growth rate: It’s only 6.27% giving a PEG ratio of 1.85 (1 is fairly valued according to this article). Note the group is very small, just 7 banks. However there are also ratios for regional banks (line 8 of the data) which have data from 721 (!) banks. There growth is also expected to be single digit but higher at 7.25% vs 6.27% for the small group. The PEG ratio is 1.83. However the PE ratio trailing and forward is 21.05 vs 17.53.

Based on that information the placing of TKB shares at CHF 64 would seem reasonably cheap. Also CHF 74 would be justifiable depending on the growth rate used. But if you look at how profit is distributed (see fig. 2), that 5% of profit is used for compensating the canton for the state guarantee (Staatsgarantie) the TKB enjoys, then the PE ratio already rises.

Here’s a look at the most recent income statement of the TKB:

Fig. 1TKBP Income Statement

The fall in bad loan/debt provisions, losses change (Wertberichtigungen – see green arrow) is the only thing that kept the TKB from posting just very slight growth.

Fig. 2PnL-TKBP-2

Fig. 3


Myriad Financial Data HY 2013 vs HY 2012

The financial data for Myriad published today can be seen below. I’ve added the trend arrows (green and red) depending on whether direction is toward more loss (red) or less loss / profit (green).Myriad-results-2013

The financial data above is from the Financial Report.

The data below from the press release. Note how the Gross margin differs significantly depending on whether it’s adjusted for amortisation, impairment and restructuring costs.


“Revenue for the year amounted to USD 43.2 million (USD 56.3 million in FY 2012), was down USD 13.1 million from FY 2012 due to the previously anticipated decline in mobile browser revenues, exiting from one off professional services projects and the discontinuation of other legacy products.”


The segment information shows that of the two divisions, only one is growing thanks to Mobile Services Licence Revenue. Mobile Services Service Revenue and the whole Device Solutions Division was loosing revenue in the six month period reported:


Another point of note is the CHF 10 million 8% interest rate loan (short-term bridging loan) from Patinex AG that Myriad has on its books, costing it over CHF 200’000 in the reporting period.


Sanctions vs Russia – Impact on European Companies

The impact of political uncertainity can be clearly felt in the time of terroritorial conflict. Russia is working on a law that will permit the russian state to confiscate foreign companies’ properties, merchandise, machines.

In recent years many companies from Western Europe had invested heavily in Russia. As an emerging market or even frontier market in some regions it has a lot of potential which investors wanted to capitalise on.

An example: KWS Saat AG invested EUR 7m in factories in Russia, which produce for the local market but are German owned.

Another example: TKS Agro Invest Union AG is said to have invested over EUR 280m in huge production facilities.Tönnies, owned by the German Clemens Tönnies, owns 65% of the venture.

Further example: Land machines maker Grimme and  Claas have factories in Russia. For both those companies Russia is one of the most important markets they sell to.

An example from Switzerland: Bucher Municipal has a majority stake in a company that “expanded in 2013, with a new production plant in Kaluga, Russia, improving the operation’s market position as a local producer. As a result of these developments, Bucher Municipal will be able to offer its customers a much broader range of winter maintenance products.” Bucher also has plants in countries such as Latvia, close to Russia. (see PDF source of this information)

Russia is only really dependent on import of meat and milk produce. Strategic sectors like automobile and energy aswell as pharma should function independently and put Russia in a strong position like the US was before and during WWII.

Over 6300 companies from Germany are invested in Russia. EU sanctions could potentially backfire.

BlackRock’s Weekly Investment Commentary March 17th 2014: “In addition, depending on how the events in Ukraine unfold, there are some specific risks for Europe. Europe imports roughly 30% of its natural gas from Russia, and should any sort of economic sanctions come to fruition, Russia could decide to interrupt this supply. At this point, we are not expecting this to occur, but should significant sanctions be enacted, such actions would certainty hurt Europe’s already-fragile economic recovery and would act as a drag on European stocks.”


Russian Sanctions vs Ukraine

Here’s a outtake of a New York Times article

[…] Russia started last year to block the import of Ukrainian goods and threatened severe hardship if Kiev signed the trade and political pact with Brussels. But officials in the Brussels headquarters of the European Commission, the union’s executive arm, say it was difficult to raise the alarm over Russian pressure last year because Ukraine itself kept mostly quiet about it until Mr. Yanukovych suddenly told Mr. Fule in November that trade restrictions imposed by Moscow had slashed key industrial sectors in Ukraine by 40 percent.

I’ve translated this from a NZZ article (22nd March 2014)

The Crimea crisis has reminded the EU how dependent it is on energy imports. According to Eurostat 86% of oil demand and 66% of gas consumption are covered by net imports. Russia is the main supplier with around a third of the EU-imports for both energy sources. Some eastern european members are much more dependent and the Ukraine is the most important transit land for the deliveries.

According to the FAZ (Frankfurter Allgemeine Zeitung)

Germany imports 39% of its oil and 36% of its gas from Russia. For the EU as a whole it’s 35% and 30%.

Bilateral Local Currency Swap Agreements between Central Banks

Currency Swaps play an important role in smoothing currency volatility and therefore lowering uncertainity and thus reducing the cost of doing international business. The central banks enter into Swap agreements which in turn permit their commercial banks to have recourse to liquidity even in times of financial distress. Considering the Emerging Markets tension of late, the move by the Reserve Bank of Australia to enter a bilateral local currency swap agreement with the Bank of Korea is positive sign for trade between the two countries ties. The Swiss National Bank had concluded similiar agreements when the Swiss France was most sought after as a safen haven asset.

PDF: FX-Swaps-Central-Banks


Cost of Turning Off a Nuclear Power Plant

Example: Cost of Shutting Down a Nuclear Power Plant in Germany

Location: Obrigheim, Baden-Württemberg, Germany

Size: 375 MW (one of the smallest)

Type: Pressurized Water Reactor

Cost: EUR 500 million (calculated, estimated)

Mass: 275’000 tons that need to be chopped up (reduced to small pieces), part of that total needs to be decontaminated and packaged. 98% of the 275k tons can be re-entered into the regular waste cycle (recycable&reusable material, waste material, waste). 1% needs to be locked away. 1% needs to be safely deposited.

Larger Nuclear Power Plants are expected to cost EUR 1’000 million. That’s for quiescence, demolation and packaging of nuclear waste.

That’s before costs of final disposal/storage of nuclear waste material.

Zalando – Greater Fool Theory Example? Or Amazon Competitor

In Mondays’ issue of the Frankfurter Allgemeine Zeitung there’s an article about the electronics distributor and retailer Conrad Electronic SE, which has 4000 employees and is run by the fourth generation of the Conrad family.

Asked about Zalando Werner Conrad said: “Zalando leads consumers to believe that every item is delivered the next day and free of shipping charges. With return rates of 50% and more the business model can’t work long-term. Even if Zalando fails the damage of having conditioned consumers to limitless order and return behaviour will remain. That is dramatic!”

Even though Zalando has 13 million customers the company is generating high losses and has little chance of every being profitable, should they not change the shipping and return policy, Werner Conrad believes.

I have read that Zalando is in the black in its core market in Germany, Switzerland and Austria, and that they have priced the shipping into their sales prices. There’s reason to believe that once they have the strong brand and loyality, consumers will pay a premium to use their shopping channel, reflected by higher price tags of sold products.

Greater Fool Theory states that any price (no matter how unrealistic) can be justified if a buyer believes that there is another buyer who will pay an even-higher price for the same item. That’s what Zalandos’ current owners may believe currently.

Adjusted EPS and Adjusted Profit at Panalpina – An Ongoing Concern, Troubling Culture


Today Panalpina published the results above.

Highlighted in yellow are the losses Panalpina has been incurring in last two years. It reminds me of several large banks in Switzerland who also have decent results, once you adjust for legal settlements/fines and goodwill adjustments. Not much good to investors though. Business is about bottom line – and above the reported EPS bottom line isn’t pretty!

I would argue that the legal settlements and goodwill impairments are one of the best places to look for badly run companies. For companies doing business around the world, there’s a decent chance, that if management doesn’t have a good compliance culture they’ll see their results cocked up on a regular basis. Of course they can’t admit that, otherwise their multi-million toplevel salaries would seem over-the-top and the managers could forget their performance bonus. So they adjust earnings to hide all their mistakes or the bad company ethics culture. In the case of Panalpina they’ve had two years running of fines. In the case of large banks it’s been longer.

If you invest, you entrust your money to someone. If that someone doesn’t see that their business is prone to regular fines and overpaying for acquisitions (subsequently adjusting goodwill, lowering EPS) then I really wouldn’t recommend investing money with them or their company.